The Comprehensive Guide to Gifting Stocks During the Holidays

With nearly half of Americans investing in the stock market, it's clear that stocks are a favored method of building wealth. In fact, 46% of Americans owned stock-related investments in 2023. Not only do stocks offer financial growth potential for investors, but they also serve as valuable and enduring gifts for loved ones during the holiday season. However, transferring shares is not as straightforward as other online purchases; there are certain legal and tax considerations to keep in mind.

Stocks as Gift: Potential for Growth

When selecting gifts, many aim for meaningful presents that extend benefits beyond the immediate joy of receiving. Stocks fit this description perfectly, with the capacity to appreciate over time, potentially yielding greater rewards than the initial investment. They also provide an engaging way for children and adults alike to learn about investing and the financial markets.

Gifting Process and Legalities

Should you decide to gift stock, you must recognize the importance of abiding by legal boundaries to avoid taxation issues. Gifting can be achieved either through custodial accounts for minors or by transferring stocks directly into another adult's investment account. Keep in mind that individuals are allowed to give up to $17,000 per recipient in 2023 ($18,000 in 2024) without incurring a gift tax.

How to Gift Stock

Gifting stock can be done in several ways, such as creating a custodial account for a child, transferring shares from your own account, or using apps designed for gifting stocks like Stockpile, which charges a monthly access fee, or GiveAShare.com, specializing in single-stock certificates.

Stock Gifting Benefits

Sharing stocks as gifts is particularly advantageous for young recipients, as it cultivates an early interest in financial planning and investment. Gifting stocks to charities is another way to pass on value—benefiting from avoiding capital gains tax, allowing you to deduct the value and supporting philanthropic efforts.

Thoughtful Selections and Caution

When choosing which stocks to gift, consider the recipient's interests and the stock's long-term potential. Be cautious of going over the annual gift exclusion limit, as exceeding this limit taps into the lifetime exclusion, which is less tax-efficient than gifting an inheritance.

Trusts as Gifting Vehicles

For sizable gifts, trusts might be an appropriate tool. They provide the donor with the ability to control the timing and terms under which the beneficiary gains access to the assets. Legal counsel is highly recommended to navigate the complexities of trust law.

Making Informed Decisions

Ultimately, gifting stock can effectively introduce younger family members to the concepts of business and investing. Always consider consulting a financial advisor to understand the full consequences of stock gifting, particularly for substantial gifts.

stocks, gifting, taxes